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A Risk-Averse Newsvendor Model Under Trade Credit Contract with CVaR

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  • Jianxin Chen

    (Faculty of Applied Mathematics, Guangdong University of Technology, Guangzhou 510520, P. R. China)

  • Yong-Wu Zhou

    (School of Business Administration, South China University of Technology, Guangzhou 510641, P. R. China)

Abstract

A supply chain with a supplier and a risk-averse retailer is considered in the paper under trade credit contract. The retailer as newsvendor faces a non-negative random demand and the supplier provides the trade credit for the risk-averse retailer with budget constraints. Different from the existing research, in a conditional value-at-risk (CVaR) framework, the optimal ordering quantity and wholesale price are obtained. Analytical results are obtained for the newsvendor retailer’s optimal ordering quantity and supplier’s optimal wholesale price under CVaR measure. Sensitivity analysis is also yielded. It is found that the optimal ordering quantity decreases as the degree of risk aversion increases. Furthermore, we analyze the effect of the initial budget of retailer and the wholesale price on the order quantity decision. This paper also finds that the trade credit contract could create value for a risk-averse supply chain with budget constraints. Finally, to compare with the existing results the theoretical analysis and numerical examples are illustrated.

Suggested Citation

  • Jianxin Chen & Yong-Wu Zhou, 2017. "A Risk-Averse Newsvendor Model Under Trade Credit Contract with CVaR," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(03), pages 1-20, June.
    • Handle: RePEc:wsi:apjorx:v:34:y:2017:i:03:n:s0217595917400127
    DOI: 10.1142/S0217595917400127
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    References listed on IDEAS

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    Cited by:

    1. Chen, Jianxin & Zhang, Tonghua & Zhou, Yong-wu, 2021. "Stochastic sensitivity and dynamical complexity of newsvendor models subject to trade credit," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 181(C), pages 471-486.
    2. Peng, Hongjun & Pang, Tao, 2019. "Optimal strategies for a three-level contract-farming supply chain with subsidy," International Journal of Production Economics, Elsevier, vol. 216(C), pages 274-286.
    3. Wu, Chengfeng & Liu, Xin & Li, Annan, 2021. "A loss-averse retailer–supplier supply chain model under trade credit in a supplier-Stackelberg game," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 182(C), pages 353-365.

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